As little as five years ago, if a BBC director-general had stood up at the Edinburgh TV festival and asked the Government to support and nurture his commercial rival, ITV, delegates would have wondered if he'd had a few too many.

Yet much of Greg Dyke's Richard Dunn Memorial Interview last weekend was a warning - and a plea - to the Government that ITV was at risk of declining to the point of irrelevance. He is not gloating (well, not much). As a veteran of ITV, he must be shocked at the speed of decline of the network. But he has more selfish reasons for defending his alma mater. As he pointed out, 'a weak ITV is not in the BBC's interest'.

The delicate broadcasting ecology of Britain needs what Dyke, who is much given of late to simian metaphors, describes as a 'third gorilla' to act as a buffer between the BBC and Sky.

He spelt out what he thinks the Government should do to bolster the network. First, the merger of Granada and Carlton should be allowed to go ahead. Second, the Government should waive the £300 million-plus the network pays for the right to broadcast on the analogue spectrum. Both Ofcom and the Treasury, he said, should realise that ITV is no longer a 'cash cow' and it should no longer be charged as if it had a monopoly on advertising revenue.

The other 'gorilla' - apart from the BBC - is Sky, and much of Dyke's rhetoric was a chest-beating exercise designed specifically to tell Sky chief executive Tony Ball he has to fight for the right to be the silverback in the broadcasting jungle. But is Dyke's apocalyptic vision premature? Can ITV ever be a dominant force in the future of commercial broadcasting? Or has the 800lb gorilla receded into the mist?

The erosion of ITV's market share over the past three years, from 30 to just under 24 per cent, has not only been a white-knuckle ride for shareholders and executives; it has taken the industry by surprise. But it was the failure of ITV Digital that really handed it on a plate to Sky. Rupert Murdoch cleaned up after ITV Digital went into administration and, aided and abetted by the failure of cable to offer any serious alternative, Sky's dominance of digital pay TV is virtually unchallenged.

Many hope that the Granada-Carlton merger will streamline decision-making and allow the network to put the ghosts of ITV Digital and other horrors behind it. But will this enable ITV to metamorphose into the hulk Dyke envisages?

Former Channel Five chief executive David Elstein thinks that, with fresh management, the channel could reinvigorate itself. Elstein's proposals, which he has spent most of the summer touting around the City, stress the impact that cost savings could have on the ability to generate revenue. Carlton and Granada have already said they anticipate making £35m of savings through the merger, but Elstein thinks he can treble this.

Carlton and Granada must accept the controversial recommendation that the Competition Commission is expected to make - to divest both of their sales houses - says Elstein. Both have explicitly said this would be a 'deal-breaker'. But for Elstein it makes no sense for them to hang on to what he describes as 'prime examples of inefficiency'.

For many ITV-watchers, Elstein's blueprint is at best a sticking plaster. What was a monopoly of TV advertising has been eroded over the past 10 years, to the point where the network has just 50 per cent of the market. When Channel 4 was allowed to sell its own advertising space in the early 1990s, a process began that has snowballed with the growth of multi-channel. The looming prospect of analogue switch-off means there's no going back to the monopoly.

Stuart Prebble, who was chief executive during the collapse of ITV Digital, doubts if waiving the fees ITV pays for its licence or radically streamlining the company's management would be enough to arrest the decline. 'If the merger doesn't go through, it would be a strong negative,' he says. 'But if it does, then many existing cost savings have already been realised. All the merger does is give [shareholders] a single diminishing asset rather than a pair of diminishing assets.'

But for many observers, ITV is far from being a busted flush. It's still the only way for advertisers to reach up to 15 million viewers on a single channel and is still the most-watched channel on TV. The brouhaha over whether or not its owners should be allowed to merge and fears among advertisers that it will abuse its dominance in the advertising market is testimony to its strength.

Former director of programmes David Liddiment cautions anyone predicting the death of ITV: 'I wouldn't write it off too fast. The moment ITV is able to focus on itself as a channel - or channels - rather than its internal complexities, it will be a force to be reckoned with.'

Advertisers and media planners are enthusiastic about what promises to be a strong autumn programming line-up, with highlights including Ray Winstone in the big-budget Henry VIII and a TV movie about Queen Boudicca.

In the white noise of multi-channel TV, any broadcaster with brands such as Coronation Street and Pop Idol has the advantage of mass recognition. The relative strength of ITV1 in multi-channel homes - where it still has around 17 per cent of audience share - is testament to this.

But no one knows how terrestrial broadcasting brands will fare in a post-analogue world. 'The only growing part of the market is multi-channel,' says Andrew Canter of agency Media Planning. 'ITV1 and ITV2 are successful sub-brands within this, but ITV is never going to go back to being the broadcasting monolith of the past.'

Strategists and ad planners for UK brands say that they increasingly value the targeted route offered by niche channels over the scattergun approach of ITV. 'The problem with advertising with ITV is that you're paying for the number you reach, rather than the demographic,' says one senior strategist for a food company. 'In the good old days, that was the only way to do it, but now, if you are targeting people who love football and like to snack while they watch football, Sky Sports would deliver much more product to market.'

Another former ITV chief executive, Richard Eyre, who left in 2000, says for the first time he doubts whether ITV can recover its dominance. 'I've kept the faith with ITV since I left. I now feel that it is underweight and the task of getting it back to the 800lb mark is an exacting one. Sir Christopher Bland [former chairman of both London Weekend Television and the BBC] always said that the relationship between the BBC and ITV was up and down. But it's got to where I'm not sure that a return to an advertising-rich market on its own will be enough.'

But Eyre has hopes: 'ITV has some stunningly valuable properties and, if realised properly, could be a real force in broadcasting. But for it to be taken over by venture capitalists would be a disaster. Investors would want a short-term return, which would eat into growth.' The recovery and the merger will certainly perk up ITV's spirits. But long term, this jungle may not be big enough for three gorillas.